TOKYO, Sept 11 (Askume) – The yen edged closer to a five-week high against the euro on Wednesday and the dollar to a three-week high, as traders anxiously awaited a key inflation report that will show how aggressively U.S. interest rate hikes will be next week. Being cut?
Markets were also cautious ahead of the first debate between US presidential candidates Kamala Harris and Donald Trump, as the two candidates face off ahead of the November election.
The dollar was down 0.2% against the yen at 142.18 yen by 0009 GMT, having fallen to a low of 141.75 yen not seen since Aug. 5. The safe-haven yen tracked long-term government bond yields, which fell overnight.
The euro was little changed at $1.1019 against the dollar, having fallen for the first time since Aug. 19 to $1.10155 overnight.
The pound was steady at $1.3080 against the dollar, having fallen to $1.3049 in the previous session, its lowest level since Aug. 21.
The US dollar index, which compares the greenback against these three rivals and three other major peers, was steady at 101.66 after hitting a one-week high of 101.77 overnight.
The Fed is widely expected to ease policy for the first time in more than four years on September 18, but traders are divided over the extent of the cut. According to LSEG calculations, federal funds futures indicate a 69% probability of a standard 25 basis point rate cut and a 31% probability of a super-large 50 basis point rate cut.
According to a Askume survey, the US core CPI is expected to rise by 2.6% annually in August, higher than the 2.9% increase in July.
“The market wants to see evidence of inflation performance, giving the Fed room to cut interest rates by 50 basis points if needed,” said Kyle Rodda, senior market analyst at Capital.com.
At the same time, he said, “a sharp decline in the market would not be welcomed as it could be seen as a signal that a demand shock is about to occur.”
Meanwhile, the televised debate between Republican candidate Trump and Democratic Vice President Harris is the immediate focus of investors, who mostly believe that if Trump wins, the dollar will strengthen because tightening tariffs could impact the greenback.
The stakes are especially high because the debate between Trump and President Joe Biden eventually led to the incumbent president dropping out of the race.
